A large number of foreign companies have withdrawn, and it is too difficult to do business in India
I don't know when India will rectify such a business environment, and who will continue to jump into this "pit"?
Text | Pole ear
It is too difficult for foreign companies to do business in India.
This is not alarmism.
Recently, there have been many reports of foreign companies withdrawing from India, Disney was revealed to have "withdrawn" from its Indian business, and Wistron Information Communication also sold its Indian business.
According to official data released by India, cited by CCTV, in the past seven years, 2,783 multinational companies have closed their operations in India, including Ford and Foxconn, accounting for about one-sixth of multinational companies in India.
In fact, for a long time in the past, India was considered a "graveyard for multinational companies", because India used various means to suppress foreign companies, including direct bans, asset penalties, and raising tariff barriers.
Taking Amazon as an example, in June 2022, Amazon was found to have concealed a transaction in which it invested in a retail group and was fined 2 billion rupees (about 170 million yuan). In March 2023, the Reserve Bank of India (RBI) fined Amazon Pay $375,000 for non-compliance with prepaid payment instrument rules.
Some people may want to say that since you have developed in India, you naturally have to abide by local laws and regulations. However, according to the Global Times, India's laws and regulations are as complex as a labyrinth, and they can be touched without care, often leading to widespread violations and selective enforcement. This has facilitated the extortion of foreign businesses by the Indian authorities.
Moreover, India has unimaginable manipulations.
Take, for example, India's fine on Vodafone. Vodafone appealed to the High Court of India after the tax authorities fined Vodafone billions of dollars, even though the Supreme Court ruled in 2012 that Vodafone was not required to pay taxes. However, the Indian parliament bypassed the Finance Bill 2012 to amend the Income Tax Act of 1961, bypassing the Supreme Court, and this amendment was retroactive, meaning that the relevant provisions were considered to have been in force since 1961, which directly changed the legal basis for Vodafone's victory and made Vodafone have to pay the tax.
Later, Vodafone sued the International Court of Justice, and under the pressure of international public opinion, India lifted the fine, which shows the business environment in India.
In the past, India was also a hot spot for Chinese enterprises to go overseas.
Xiaomi became India's No. 1 selling smartphone brand in 2017, with a market share of more than 50% for Chinese smartphone brands, and four of the top five smartphone brands in terms of shipments in 2018.
In 2018, 5 of the top 10 Android apps in India were from China, and 44 of the top 100 Android apps were developed by Chinese companies.
According to data from Tracxn, a market research and analysis platform, China's overall venture capital investment in India rose from US$668 million in 2016 to US$5.6 billion in 2018.
However, in April 2020, India's Ministry of Commerce and Industry abruptly revised its FDI policy, changing all investments directly or indirectly from India's land neighbours from the "automatic approval route" that was previously applied to most industries to the "government approval route". The move was seen as a targeted move to restrict Chinese companies' investment in India.
In January 2022, the Indian Tax Intelligence Agency fined Xiaomi India 6.53 billion rupees (about 558 million yuan) in taxes. On May 1, another US$725 million (about 4.8 billion yuan) of its assets were frozen.
In June, India's Enforcement Directorate issued a formal notice to Xiaomi's Indian subsidiary, some executives, and associated banks, accusing them of illegally transferring funds abroad and allegedly violating India's Foreign Exchange Management Act. The accusation means that nearly $700 million of Xiaomi's 2022 frozen by India is likely to be formally confiscated, which is also the largest amount of funds confiscated since the establishment of the Indian government.
At the beginning of 2017, Lei Jun, the founder of Xiaomi Technology, gave Indian Prime Minister Narendra Modi an "engineering machine" of Redmi 4A, which was once rumored to be a good story.
In July 2022, 119 India-related bank accounts of vivo were blocked by the Enforcement Directorate of India, totaling 4.65 billion rupees (about 400 million yuan). In a relevant statement, the Enforcement Directorate of India alleged that in order to evade taxes, vivo India remitted 624.76 billion rupees (about 45.5 billion yuan) to China and other places, an amount equivalent to about half of the company's revenue.
This past October, Indian law enforcement arrested four industry executives, including an employee of Chinese smartphone maker Vivo, on charges of money laundering. In response, vivo said: "vivo strictly abides by local laws and regulations in India. We are closely monitoring the recent investigation and will take all feasible legal steps to respond to it. ”
Not only Chinese enterprises, but also in recent years, the Indian tax authorities have conducted tax investigations and issued high fines to many foreign-funded enterprises such as Shell, Nokia, IBM, Walmart, and Cairn Energy. Many companies in Japan and South Korea are also facing the same situation. Regulatory uncertainty has become a major obstacle to foreign investment.
It is no wonder that some commentators say that this is India's routine, first giving foreign capital some sweetness or good promises to induce foreign companies to invest in India. When foreign companies have some background in India and have achieved certain benefits, especially after India has learned a little in this field, the Indian authorities will use various methods to carry out de facto blackmail against foreign companies, leaving them in a dilemma.
Wistron, which has just sold its India business, is the first company to produce iPhones in India, having been operating in India for more than 15 years, having produced models such as the iPhone SE for Apple. The reason for Wistron's withdrawal from India, the American quartz network previously reported that the company has encountered many controversial treatments in India.
On December 12, 2020, Wistron India's factory was smashed. The picture comes from the Indian media
Previously, Foxconn's parent company, Hon Hai Precision, issued a statement saying that it had withdrawn from a $19.5 billion semiconductor joint venture with India's Vedanta Group. Foxconn's explanation that there is a "challenging gap that cannot be successfully overcome" is also very intriguing.
Due to the unstable business environment, Ford Motor in the United States had to withdraw from the Indian market in 2021 due to huge losses, which had been cultivated for 10 years, and Tesla also suspended its sales plan in India in 2022 due to tax issues.
In the World Bank's Doing Business 2020 report, India has been identified as one of the "hardest countries in the world to do business".
It is conceivable that if it were not really unbearable, how could these multinational companies reluctantly give up such a large market as India.
It's just that I don't know when India will rectify such a business environment, and who will continue to jump into this "pit"?
Comprehensively compiled from CCTV News, Global Times, Overseas Network, etc